FOCUSED ON LEGAL ISSUES AFFECTING BUSINESSES OF ALL SHAPES AND SIZES

In a commercial loan transaction, a bank is able to (and often does) obtain a perfected Uniform Commercial Code security interest in a deposit account maintained by its borrower at the bank. A bank that has obtained such an interest may not think to worry about what would happen if it receives a garnishment summons from another creditor of that borrower. In a recent case, however, a federal court ruled that a Garnishment Creditor trumped the bank’s security interest in its borrower’s deposit account because the bank failed to declare the borrower’s loan in default and take affirmative steps to enforce its security interest before it received the garnishment summons.

Two recent court decisions involve community banks being sued by bankruptcy trustees to claw back transfers the banks received to satisfy check overdrafts from customers who subsequently filed bankruptcy.

While overall bankruptcy filings continue a decline that started in 2010, the U.S. Supreme Court is unusually active in bankruptcy issues this term, having accepted six cases with bankruptcy issues. In this article, we discuss one of the issues the Supreme Court is considering: whether a debtor can strip a lien off of real estate in a Chapter 7 case.

About Our Blog

The Spotts Fain Lawful Thoughts® blog focuses on the current legal issues affecting businesses of all shapes and sizes. From labor and employment and construction, to intellectual property and beyond, Lawful Thoughts® provides businesses with easy to read, practical thoughts on the current legal trends and topics facing businesses today.

Subscribe

Enter your email address to be notified when new content is posted on our blog.